Accounting And Finance For Managers At Coca Cola Amatil Limited

Discussion

Describe about the Accounting and Finance for Managers for Coca Cola Amatil Limited.

Coca Cola Amatil Limited (Food, Beverage and Tobacco) company is one of the largest bottlers of non-alcoholic beverages in Asia –Pacific region and it’s among the world’s five major Coca-Cola bottlers. It has 29% share of total Coca Cola Company.   This Australian beverage and tobacco company was established in the year of 1904. At the beginning of its journey, Coca cola AMATIL LIMITED, was a tobacco company. With time being this company got changed and in the year 1964 it presents a soft drinks to the consumers. In the recent decades this company has huge demand in the Australian market. In the year 1972 the company enlisted in the Australian Stock Exchange (Andini & Simatupang, 2014).  This company operates in Non-alcoholic beverages, food and tobacco. Company portfolio includes following brands like Coca-Cola varieties, Lift, Sprite, Fanta, Mount Franklin, Jim bean, SPC and many more.

In this following report, by considering to make a brief discussion about the financial statements from June 2014 to July 2015 of CCA will come to a conclusion about the financial growth during this period of this company (Rosli, 2012).

Current financial statement:

Mainly there are three financial statements which are being discussed in this context. At first let’s consider the income statement of the company. From the income statement of the respective company here, we can state that trading revenue from non-alcohol beverages, Alcohol & Coffee and Corporate, food & services, in 2015 is 5093.6 million Australian dollars whereas in 2014 the revenue was 4942.8 million dollar. Which denotes that company’s trade progressed 3.1 % totally in the year 2015 as compared to the same time of last year 2014(Johnston & Sidaway, 2015). Trade is a major part of every business therefore trading revenue significantly shows the performance and growth of the respective company.

Moreover, Earning before Interest, tax (EBIT) and significant items was 660.6 in 2015 and 651.5 in 2014. In that case EBIT is also higher at the end of 2015, with an increase of 1.4% totally. There is a significant decrease of net financial cost in the year of 2015, of 35.7 million which also help the company to gain an overall profit of 393.4 million in Australian market. It shows an increment of huge 44.6 % compared to previous year June 2014 (Horng & Tsai, 2012).

The first part of the financial statement consists current asset. According to this statement the cash asset of the company was 1012.4 million dollar in June, 2014 whereas in December of 2014 the total cash asset turned down to 818.2 million dollar. In 2015 the amount of cash asset increases to 1138.2 million dollar (Huyue, 2012).

Thus, there arises a volatility in this cash asset statement. Although volatility is not good for any company but the Coca Cola Amatil Limited increases its cash asset in 2015 that means it increases its asset from the past few years.

There are various components in the current asset of a company among them payments, current tax asset, derivatives and inventories are most important part in overall (Nobes, 2012). Asset is mainly the resources of the company. In the balance there are two main components, one is asset and another is liability. If asset of any company increases over time then it meant that the respective company is doing well in respective to its objective or goal of the business.

Here the total asset is 2854.0 million dollar in 2015 which is more than the amount 2580.1 (December) and 2574.1(June) in the year 2014. Thus the financial report delivered that the asset of the company is continuously over time.

There are exist two types of asset in every firm, one is current asset and another is non-current asset. As there exist derivatives in the current asset, the con current asset is also consists some derivatives. These derivatives may influence the asset. It depends of the type of derivatives that how it will influence on asset of the company (Rae, 2012). Here by, the investments’ in bottlers’ agreements is very important issue in this financial data, in this case the amount of investment is 926.0 million dollar in 2015 which is lower than the amount 942.5 million dollar in 2014. It reflects that the investment was not going well in these two years. Moreover, the amount of intangible asset(nonphysical asset : it may be goodwill of the company, copyright, trade names or many other nonphysical asset) is 324.0 in 2015 which is also lower than the amount which stand in the June in 2014and in December in 2014.

As long as the tangible asset or physical asset like property, plant and equipment is 1977.7 million dollar in the year 2015 which is also lower than the amount 2031.2 resulted in December 2014 and 2007.5 million dollar in June 2014 (Boulos et al. 2012). Although, the total noncurrent amount was 6322.1 million dollar in end of July 2015 which is more than the amount 3446.3 resulted in December, 2014 but not more than 3502.2 which has been resulted in June 2014.

Therefore, the amount of total asset of the company was $2854.0 + $3468.1 = $ 6322.1 million at the end of last financial year. The amount of the total asset is massively higher than the both of the amount in June and December 2014. As the current asset is massively higher than the past records therefore as the amount of noncurrent asset is low the there is a state of balancing by which the total asset has been balanced. Here the derivatives also played an important role (Hattersley Isaacs & Burch, 2013). The condition of derivatives in both of the cases current and non-current asset is much higher than past records. In case of noncurrent asset the proportion of derivatives is $95.3 million whereas in current asset it was $46.2 million.

After discussion the asset of the company coca cola now let’s consider the next part that is liability of the company. According to the accountant if the liability is higher than it reflects badly in its financial statement. Liability can be said as a responsibility, it may be the loans taken from a particular bank or may be the tax liability. There are two parts of liability, first part is the current liabilities and the second one is noncurrent liabilities.

The current liability consists trade and other payments, derivatives, current tax liabilities, interest bearing liabilities, provision and trade and other payables (Healy & Palepu, 2012). If a company increases its asset then significantly good for the company but in case of liability it is reverse. As much as the liability is will badly affect the company (Beekes, Brown & Zhang, 2015).

In 2015 the total amount of current liabilities is 1924.1 million dollar which is deliberately higher than the current liabilities in 2014 (1680.8 million dollar in December and 1567.6 million dollar in June). Along with the asset the liabilities was also going to be higher in 2015 which is not good for the company. In this segment the trade and payables which massively fall down from 1182.4 million dollar to 996.3 million dollar that means the company’s liability towards trade is lower than before but in case of interesting bearing liabilities it reflects that in 2015 the interest bearing liabilities is more than double of the amount in December, 2014(325.3).

Interest bearing liabilities denote the coca cola has taken loan to some financial institution or banks, therefore, over time it has to pay interest against to this loan. This amount of loan significantly increases from 2014 to 2015 (Färe & Grosskopf, 2012).  Similarly, considering the non-current liabilities then it can be stated that the total noncurrent liabilities is lower than the past record of 2014. The figure was 2100.1 million dollar in 2015 which is much lower than the amount 2658.9 million dollar and 2832.3 million dollar respectively in December in 2014 and July in 2014. Therefore, the total liabilities is = $2100.1 + $1924.1 = $4024.2 million which is lower compare to $4339.7 million and $4399.9 million.

Thus, it can be stated from this figure that company’s liabilities is going to be lower in 2015 rather than in 2014. Therefore net asset of the company will be the amount of total asset after deducting the total liabilities. Hence, in this financial statement of Coca Cola Amatil Limited the total asset in the 015 is $6322.1 million whereas, the total liabilities is $4024.2. Then the net asset amount is = $6322.1-$4024.2 = $2297.9 million. The amount of net asset is also higher than the last year amount which is $1686.7.

Equity is the percentage of share of the respective company which it sell in the market. As Coca Cola is listed in the Australian Stock Exchange it has 29% per of total share in the open market. Now if the company want to rise its proportion of share which is holds by the shareholders in the market then it has to get permission from the state authority.

Authority attentively goes through the performance of the respective company and then gives permission if it deserves. In the financial statement of 2015 it has been declared that the total equity of the company is 2297.9 million dollar. In the year 2014 the total equity share of the company was 1686.7 million dollar at the end of December and 1676.4 million dollar in June 2014.(Appendix1)

As the equity is much higher in last financial year so it can be said that the performance of Coca Cola is well in last year. The proportion of share capital is 2271.7 million dollar which is same in three quarters as well but share held by equity is 17.4 million dollar in 2015. Other hand the non-controlling interest is 3.6.6 which is ten times than the interest in December, 2014 in June, 2014. Hereby, the performance of the company is repetitively going well.

Among the three financial statements, cash flow is significantly shows the amount of Net cash flow from operating activities and net cash flow used in investing activities.  Net cash flows from operating activities includes all cost which are related to all activities in the factory, like wages, depreciation, other payments related to the production procedure. Thus, the cost of operating activities is 161.2 million dollar whereas, in the year 2014 the operating cost of coca cola was 256.6 million dollar. Compare these two figure it can be stated that as the cost of operating activity is much lower in last financial year so it will oil the revenue figure of the respective company (Goldberg, 2012).

Now in the second part of the cash flow statement net cash flow in investing activities are considered. It mainly includes the cash flow of the investment required for the business. Invest in long term deposit is 67.7 million dollar which is lower than 100 million dollar in 2014. Moreover, the addition of property is 85.7 million dollar, which is also lower in 2015 rather than 2014.

In objective to run, a business there requires an adequate amount of financial support. Therefore, financing activities is also a part of cash flow statement, which should be considered as net cash flow from financing activities (Van Uytsel, 2012). Apart from this three part in cash flow statement, the cash and cash equivalents are also played a major role to influence the whole strategy of business. In the year 2015 the cash equivalent amount is 1,132.9 million dollar but in case of 2014 the amount is little bit low and the figure was around 1009.9 million dollar. 

There is a huge demand of beverage business overall Australian market. There exist many other beverages company which are running their business. But, Coca-Cola Amatil Company faces a price pressure from other big brand like Golden Circle, PepsiCo, Kriks. All these companies are in the field of competitor market in Australian Supermarket business. According to an article published in the Sydney Morning, the Woolworth and Coal who has maximum 80% of total market share continuously throw the challenges to the Coca-Cola Amatil company (Taylor, 2012). Moreover, because of this price pressure, CCA has been pressured by those competitors to lower its product price in Australian market.

The main competition CCA is getting in Australia is its Supermarket business, price reduction pressure from the other competitor in the market and at last the labels that is owned by the chain of supermarket in recent years.

This Supermarkets took an uphold in the Australian market which causing CCA a tough competition to stay and grow in market.  Some other big brand like Pepsico and few other soft drinks and beverages company reduced their product price by giving discount on the. As a result the earning of the CCA Company reduced a lot (Taplin, 2012). The Managing director Mr. Terry Davis commented on this matter that, the company has no other option other than reducing the price of the product to sustain in Australian food and beverage market due to the discounting strategy of other rivals in supermarkets like Pepsico. He also added that its affecting the customer confidence on brand and its mainly affecting the areas which are socioeconomic ally lower sided.  But he also thinks that the price set by the Pepsico is not sustainable for long term as it will fall into financial loss. 

The main strength of CCA from its most rival company Pepsi is that, Pepsi operate in Australia through Pepsico and Schweppes and the main bottling process is done in India, which gives Pepsi an advantage in pricing. CCA bottling is done in Sydney which can never compete in price as compare to the bottling done for Pepsi in India, which is main reason for low price of Pepsi (Horng, Jeouâ€ÂShyan & Chenâ€ÂTsang Simon Tsai, 2012). Day by day the imported brand in supermarkets with lower price taking attention in consumers.

The premium pricing of CCA also affecting their market as consumers are getting a cheaper one from Pepsi or other brand may be in little different taste but same type of beverages (Xiao, O’Neill & Mattila, 2012). The competitors of CCA is producing the more or less same type of beverages, so there are less unique  product company have to offer o consumers like Vanilla Coke. This making the competitor stronger in the Australian market.  Although, CCA also improving with the consumer preference by introducing product like Coke life as compared with the Pepsi next.(Appendix2)

Financial Analysis 

The  current ratio  of   the  company is  1.48  which  can be  considered  healthy   when compared to the    industry  standards.   Similarly,  the   quick  ratio of the  company is  1.081  which reflects the actual  financial  condution of  the  company . The asset  turover  ratio  is   0.81   which can be stated  as   substantial in the  existing  market  conditions.  However, the   days  creditiors is 71  days when  compared  to 58 days of  days of  debtors.   The  company has to take appropriate  measures to rectify this  situation . 

As a recommendation, it can be said that some business strategies should be maintained tactfully to capture the market share and increase demand.

Customer care:

Customer is the term, which mean a proper care of customer. The respective company should be promising to its customers that mean the quality of the product should be maintained properly. There are some other strategies like labelling, attractive container, decorative colours by which they can grab the customers.

Improve the quality of product and maintain the quality:

There needs a continuous up gradation of the quality of the product as the respective customers don’t want to take other option instead of that product. Moreover, in competitive market as there are many other competitors of Coca Cola Amatil Limited so it is necessary to maintain good quality of product in existing market.

Market participation should be improved:

Market participation is another factor which should be keep in mind when a businessman run a business. To improve market Participation Company should promote their business in different areas of a state. As they grab their market participation and able to improve it then automatically the demand of that product will increase.

More strengthen marketing strategy:

Those market strategies taken by Coca Cola Company should be more strong and suitable to its present condition. Company should take advice of senior accounts of the company as they can give a overall scenario to the company. Therefore in that context the company should have some experienced advisers.

More efficient marketing employee:

The employer of the company should be efficient in order to meet the goal and objective of the company. Mainly the workers who are involved in the production procedure should be loyal and efficient in manner. If the employer of Coca Cola Company may successively efficient then the company will be carry a good will.

Emphasize in advertisement:

To promote their coca cola company should be more focused on advertising part. Moreover, in competitive market structure advertising plays an important role on behalf of the company. Therefore, to emphasize in advertising as a strategy will obviously benefited for the respective company. In international market, advertisement is the only procedure to make the customers known about the product.

Maintain Research & Development:

Today’s corporate industry became continuous changing industry. To compete in this sector one firm has to focus in the research and development of that respective product. Therefore, to upgrade new technologies Coca cola company should maintain R&D department in its own. By upgrading new technologies and innovative ideas company maintain a god quality product and may be able to keep promise to their customers. As this are big challenges to the Coca cola Company to reduce the price of its product by maintaining or upgrading its quality. The challenges accepted if the research and development department of the company will focus in new invention.

Conclusion:

As a conclusion it can be stated the report is all about discussed the three financial statements – Budget statement, Income statement and cash flow of Coca Cola Amatil Limited. The repot sated the Coca cola company has 29% of total share in the market of food beverage and tobacco in Australia moreover, it a leading company in Australian market. According to the summarization of the financial statement one can easily understand or notify that Coca Cola Company has been doing well in last few years. In the year 2015 Company’s performance was very and appreciable and company was continuously doing progress in the year 2015 to 2016. The CEO of the Coca Cola Company announced to focus on research and development part of the company and the company also willing to increase its market share in the current financial year.

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